Arrowhead Pharmaceuticals (NASDAQ:ARWR) Q1 2021 Earnings Call

0:00 Thank you, Jonathan. Good afternoon, everyone. Thank you for joining us today to discuss Arrowhead's results for its fiscal 2021. The first quarter ended December 31, 2020. With us today from management are President and CEO, Dr. Christopher Anzalone, who will provide an overview of the quarter, Dr. James Hamilton, our Senior Vice President of Discovery and Translational Medicine, who has graciously agreed to sub in for Dr. Javier San Martin while he is out ill today.

0:50 and Ken Muskowski, our Chief Financial Officer, who will give a review of the financials. In addition, James Hazard, our Chief Commercial Officer, will be available during the Q&A portion of today's call. Before we begin, I would like to remind you that comments made during today's call contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical fact, and including without limitation those with respect to Arrowhead's goals, plans and strategies are forward-looking statements. These include statements regarding our expectations around the development, safety and efficacy of our drug candidates, projected cash runway and expected future development and commercialization activities. These statements represent management's current expectations and are subject to numerous risks and uncertainties that could cause actual results to differ materially Thanks, Vince.

2:15 Good afternoon, everyone, and thank you for joining us today. The last quarter was an important period for us and our shareholders because we demonstrated clear advances in multiple development programs that we believe represent key value drivers for the respective product candidates and our proprietary trim platform. We see this as positioning us well to build substantial value throughout 2021. We seek to create value in two primary ways. First, we push RNAi and our platform Thank you very much. As we look at 2021, we expect substantial progress on both fronts, with several opportunities in the first half of the calendar year alone.

3:21 For instance, by the middle of the year, we could have clinical proof of concept for our ability to bring RNAi outside the liver, opening a whole new range of addressable diseases without adequate treatments. We also expect to begin three large Phase IIb studies and a Phase 3 study during this time frame, and we may also have a better idea about how we in Takeda may be able to streamline the Arrow AAT clinical program to accelerate that drug candidate to market. Let's begin by looking at our earlier stage programs. The power of Arrowhead's TRMM platform is our ability to rapidly discover and develop multiple new drugs targeting diverse disease areas in a way that has been predictable, reproducible, and with an attractive safety profile. Each new program builds upon prior programs, which could make them progressively lower risk. We've seen this in our liver-targeted programs and are applying this concept to our extra-hepatic initiatives.

4:17 We hope to do in many other tissues what we have done in the liver. Given our clinical experience in hepatocyte-targeted programs, specifically in HPV, AAT, APOC3, ANG3, and LPAA, We generally expect future hepatocyte-directed candidates, such as AeroHSD and others, to also be highly potent and well-tolerated. Creating this type of expectation in a new cell type could represent a substantial value creation event. Now imagine leveraging that not only in a single new cell type, but with many new cell types. As we have said in the past, we expect to be able to target a new cell type every 18 to 24 months. If we can pull this off, we would expect it to provide a huge amount of leverage in value creation.

5:02 This is exciting and it's one reason I believe that the progress we've made over the recent time periods could be just a prelude to something bigger. We think we are now on the cusp of having clinical data to assess the ability of TRMM to knock down target genes in the lung and in solid tumors and are working toward bringing our first muscle targeted program into the clinic late this summer. Thank you very much.

5:47 So first we need to establish that these new molecules are well tolerated before we can take a breath and exhale and then focus on assessing efficacy in humans. We think we are almost at that exhale stage now. The studies are still ongoing and data collection continues, but so far we have not seen anything concerning on the safety and tolerability front for AeroENAC, which is our first lung-targeted program, or for AeroHIF-2, our first tumor-targeted program. Thank you very much. The healthy volunteer data at this point may be more informative.

6:44 Given the small number of patients we will be treating in the current study, only four per cohort on active drug, it may be difficult to discern FEV1 changes. However, ENAC knockdown in healthy volunteers should be much easier to interpret. Therefore, this is our primary focus right now. Should this be positive, it would represent a huge leap forward for our company and for the entire RNAI field. We believe it would suggest we may not only have a drug in aeroENAC, But we may also have a lung franchise that could be leveraged against many gene targets for many different diseases. This would indeed be a big event. Regarding arrow HIF-2, we hope to have some preliminary knockdown data to share by the middle of the calendar year. We're taking biopsies from metastases pre-treatment and during treatment, and we'll be assessing HIF-2 alpha knockdown.

7:32 This is too small a study and too short an observation period to be focused on progression-free survival, but we think if we are able to show good reduction in HIF-2-alpha expression in these metastases, we will have demonstrated something truly important. HIF-2-alpha is a well-validated target, particularly for the clear cell form of renal cell carcinoma, so demonstrating a consistent reduction in expression could be strong evidence that we have a drug. Further, and potentially more importantly, we believe it could also suggest that we have a solid tumor franchise. Our targeting strategy is not designed to be RCC specific, but rather to enable delivery to a variety of solid tumor types. If we can show reduction of any gene product inside of solid tumors, in this case HIF-2-alpha, it would suggest to us that we can address a wide variety of cancer targets across different solid tumors. As with clinical proof of concept in the lung, this would be a giant leap forward and could represent a substantial value inflection point.

8:31 By the end of the second calendar quarter, we could have proof of concept that we can silence gene expression with RNAi in three different cell types across eight different clinical programs. I don't believe there is another company on the planet that can say that. Later in the summer, we expect to increase our reach to a fourth cell type when we expect to file a CTA for our first skeletal muscle targeted program. While we're conducting these clinical studies, we continue to work in parallel on multiple additional targets in tumor and pulmonary For the latter, we have a number of early programs in development, and I expect us to file at least two pulmonary CTAs in calendar 2021. We also continue work on our COVID-19 program. We are focused on developing an antiviral approach and are interrogating a number of different RNAi triggers targeting different positions within the current virus and potentially other coronaviruses as well. While we are excited about the various vaccines, mutations in the current virus, and preparation for the next coronavirus suggest to us that our work continues to be important.

9:35 In addition, we are now starting to see promising early results on pulmonary formulation work that may open up some important new possibilities. Specifically, we have been evaluating the possibility of using an inhaler device as opposed to a nebulized formulation for some indications. That would improve convenience and could make for a more viable commercial product for higher prevalence diseases with large patient populations. Our plan for Aerolung2, which is in development to treat COPD, was to begin the clinical program with a nebulized formulation and then to work out the necessary technology to switch over to an inhaler. We have decided to hold off on the CTA for now since we are increasingly encouraged by our new possibilities.

10:21 We don't think this slows The ultimate goal is to take forward a therapeutic with optimal efficacy, safety, and convenience in a form that is useful to physicians and their patients. We will provide an update over the next quarter pending completion of a few ongoing studies. Let's now shift to our later stage programs and discuss our progress toward commercialization. Last quarter, we presented positive, Data from our Arrow AAT, Arrow APOC3, and Arrow ANG3 programs. We were very encouraged by the results and believe they support rapid advancement of these programs. Specifically, we presented Phase II data at AASLD on Arrow AAT, showing strong reductions in the production of the mutant Z-AAT protein and improvements in multiple biomarkers of Alpha-1 liver disease.

11:17 This was exciting for us, for the Alpha-1 field, and for our partner, Takeda. These data were from biopsies after only six months of treatment. We also expect to have 12-month biopsy data over the next month or two. We plan on discussing those data with the FDA and proposing some changes to the study design and endpoints, with a goal of shortening the time to a potential NDA. For AeroApoC3 and AeroAng3, we presented new data on Phase I-II studies at multiple medical meetings, including the European Society of Cardiology, and the American Heart Association meetings and subsequently hosted KOL webinars to discuss the data and our plans for their future development. These plans have continued to progress and we are now preparing to begin the next stages of development.

12:02 In fact, we have already filed an IND for AeroAng3 and intend to proceed with a Phase 2b study pending FDA review. AeroApoC3 and AeroAns3 are all getting to points where the regulatory and development path and potential timelines become clearer. This, I believe, is a key event. For all three programs, the data generated to date have suggested that the drugs are doing what they are designed to do. There is also a clear need in each disease for new therapeutics. With increased regulatory clarity, We may soon have a direct line of sight for the timelines required to have multiple potential commercial products as long as the data continue to support advancement and we continue to execute efficiently. We have a high level of confidence about both. In the first half of the year, we expect the following.

12:49 One, pending FDA review, we intend to begin a Phase 2B dose finding clinical study of AeroAng3. Two, File an IND for AeroApoC3 and then later, following FDA review, begin two Phase IIb studies and potentially a Phase III study in patients with familial chylomicronemia syndrome. Three, engage with FDA on design, endpoints, size, and duration of treatment for a potentially streamlined AeroAAT study. And four, potentially report on 12-month biopsy results from the 2002 open-label study of AeroAAT. By the middle of the year, we plan to be on track to share preliminary data for AeroHSD in healthy volunteers and in patients with NASH and suspected NASH.

13:36 We expect to be the first company to have clinical data using any modality against the target HSD17B13. The genetic validation is strong for inhibiting the target, and there is clearly substantial unmet need in NASH, so we are eager to see these data and evaluate the next steps for this program. Silencing HSD is thought to confer a possible protective effect against liver disease. But given the biology of this target, we would not expect a decrease in liver fat. Therefore, what we are looking for is simply depth and duration of knockdown. We expect arrow HSD to be a potent drug candidate, as has been the case for our other hepatocyte-targeted drug candidates. In the second half of the year, we expect the following. One, collect and potentially report on 18-month biopsies from the 2002 open-label study of AeroAAT.

14:26 Two, potentially begin Phase IIb studies for AeroENAC, AeroHIF-2, and AeroHSD. And three, begin a number of smaller Phase IIb studies for AeroAng3 and AeroApoC3 that will run in parallel with the studies I've already described. There are a number of questions that we would like to answer in both programs, that we could address in short and open-label studies. So we expect regular data readouts for these programs while the longer, blinded studies are ongoing. With that overview, I'd now like to turn the call over to Dr. James Hamilton. James?

15:01 Thank you, Chris, and good afternoon, everyone. Since we plan to have preliminary data this year for Arrow ENAC, Arrow HIF-2, and Arrow HSD, I would like to go through the general designs for those clinical studies and provide an update on their status. First, I will discuss aeroenac, our inhaled RNAi therapeutic candidate designed to target the epithelial sodium channel to treat cystic fibrosis, or CF. CF is a rare disease caused by a genetic mutation that leads to mucus buildup in the lungs. It is characterized by airway dehydration and reduced mucociliary transport. Patients with CF can have difficulty breathing and experience frequent and persistent lung infections.

15:49 AeroENAC is in a Phase 1-2 dose escalating study to evaluate the safety, tolerability, and pharmacokinetic effects of AeroENAC in up to 24 normal healthy volunteers and to evaluate the safety, tolerability, and efficacy in up to 24 patients with CF. The patient portion of the study includes three cohorts, two with six patients each and one with 12 patients. This was the initially planned design. We intend to make protocol changes shortly that will add an additional 12 healthy volunteers who will undergo bronchoscopy with bronchial brushings and bronchial alveolar lavage, or BAL, to evaluate ENAC knockdown in the lungs. We are also considering expanding the CF patient cohorts as well.

16:43 We've completed dosing in all initially planned single-dose healthy volunteer cohorts, and we have been pleased with the safety and tolerability results to date. We believe this is an important finding for AeroENAC and for the pulmonary trim platform as we begin to expand our pipeline into additional diseases in the lungs. This is particularly relevant to drugs inhibiting ENAC, as many of the small molecule ENAC inhibitors have been dose limited by toxicity. We are now dosing CF patients in the first cohort, which we expect to be fully enrolled before the end of next month, at which time we plan to begin enrolling the second patient cohort. So what data do we expect from this study?

17:30 First and most importantly, we are assessing safety and tolerability in all cohorts. In the expanded healthy volunteer cohort, as I mentioned, we will be conducting bronchial brushings and BAL. This method may give us a signal on target engagement and a better understanding of pharmacologic activity. Remember that ENAC is not secreted, so we are not able to measure target engagement in the blood as we are typically able to do for our liver-targeted programs. In addition, in CF patients, we will be measuring changes in FEV1 and in Lung Clearance Index, or LCI. These would be indications of functional improvements in mucociliary clearance and lung function.

18:16 There is clearly a lot of data coming out of this first-in-human study, so we are eager to see the AeroENAC results. The next program I'd like to highlight is AeroHIF-2. AeroHIP2 is designed to treat clear cell renal cell carcinoma, or RCC, and we are currently dosing RCC patients in a Phase 1b dose-finding clinical study in three cohorts of at least six patients each for a total of 18 patients with advanced clear cell RCC.

18:48 The study is designed to evaluate the safety of AeroHIP2 and to determine the recommended Phase 2 dose.

18:55 We are also assessing pharmacokinetics, and preliminary efficacy based on resist, as well as post-dose tumoral expression of HIF-2-alpha and HIF-associated genes. We are dosing the second cohort at this time, which we expect to be fully enrolled this month. The patients in this study are heavily pretreated and have failed multiple lines of therapies, so a positive result for this first in-human study would include data suggesting delivery to tumors as well as measurable levels of HIF-2 knockdown. Similar to AeroENAC, we are also looking to characterize safety and tolerability and to select a dose for further studies in Phase II.

19:41 The last program I'd like to describe is AeroHSD, our investigational candidate for the potential treatment of alcohol and non-alcohol-related liver disease. There is strong genetic data supporting HSD17B13 as a target for NASH and alcoholic liver disease. We are conducting a Phase 1-2 single and multiple dose escalating study to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamic effects of aeroHSD in normal healthy volunteers as well as in patients with NASH or suspected NASH. We have completed the single dose portion of the study in healthy volunteers. We are currently enrolling and dosing the multiple dose patient portion of the study in NASH or suspected NASH patients. We have completed the first patient cohort and expect to complete enrollment of the second patient cohort this month.

20:35 After that is complete, there are two more patient cohorts to enroll sequentially. This target is also not secreted, so in order to assess target engagement, we utilize liver biopsies. It's important to mention that this study only involves two doses, which relative to other later stage NASH studies is only a short duration of exposure. So we don't expect to see substantial signs of disease improvement, but rather we are focused on selecting the dose level and regimen achieving optimal gene target silencing. However, we know the platform is highly effective at silencing hepatocyte expressed genes, so we would expect a high level of target engagement. In addition, we are the first to study inhibition of this target in humans, so we will see if there are any early encouraging signs of efficacy, even though this would be unexpected.

21:31 As mentioned earlier, we expect all three of these programs to have preliminary data readouts around the middle of the year. It's too early to know in which order they will come, but we expect this to be an exciting period with all these potential data reports coalescing roughly around the same time. Our intention would be to report top-line data highlights in a press release and then further present a fuller data set at an appropriate medical meeting. I will now turn the call over to Ken Miszkowski, Arrowhead's Chief Financial Officer.

22:04 Ken? Thank you, James, and good afternoon, everyone. As we reported today, our net loss for the quarter ended December 31, 2020, was $20.7 million, or 20 cents per share, based on $102.8 million in Fully Diluted Weighted Average Shares Outstanding. This compares with a net loss of $2.7 million, or $0.03 per share, based on $97.1 million Fully Diluted Weighted Average Shares Outstanding for the quarter ended December 31, 2019. Revenue for the quarter ended December 31, 2020 was $21.3 million, compared to $29.5 million for the quarter ended December 31, 2019. Revenue in both periods relates to the recognition of a portion of the upfront payments and milestones received from our license and collaboration agreements with Janssen.

22:55 And revenue in the current period also includes the recognition of a portion of the $300 million upfront payment due upon the signing of the collaboration agreement with Takeda. This payment was received in January. Revenue for the Janssen and Takeda agreements will be recognized as we continue to work toward completing our performance obligations of managing the clinical trials in process and certain manufacturing-related services. We anticipate the remaining deferred revenue of $6.7 million associated with the Janssen collaboration will be recognized in the next fiscal quarter. The remaining $292.1 million of revenue associated with the Takeda collaboration is anticipated to be recognized over approximately two years.

23:44 Any additional milestones achieved with our collaboration partners would be additive to this projection. Total operating expenses for the quarter ended December 31, 2020 were $45.4 million compared to $34.3 million for the quarter ended December 31, 2019. This increase is primarily due to increased personnel cost and non-cash stock compensation in R&D as our headcount continues to grow. The increase is also due to increased candidate-specific and discovery R&D costs. Net cash used in operating activities during the quarter ended December 31, 2020 was $38.9 million compared with net cash used in operating activities of $23.5 million during the quarter ended December 31, 2019.

24:33 The key driver of this change was the increased R&D cost discussed. We continue to estimate our full-year cash burn to be between $200 million and $250 million. Turning to our balance sheet, our cash and investments totaled $416.2 million at December 31, 2020, compared with $453 million at September 30, 2020. The decrease in our cash and investments is primarily due to cash used for operating activities. With the collection of the $300 million upfront payment in January 2021, our cash and Our current cash and investments total approximately $700 million. Our common shares outstanding at December 31, 2020 were $103.2 million.

25:21 With that brief overview, I will now turn the call back to Chris.

25:25 Thanks, Ken. We have a lot in front of us this year. We expect waves of clinical data readouts throughout the year from Arrow HSD, Arrow ENAC, Arrow HIF-2, Arrow APOC-3, Arrow ANG-3, and Arrow AAT. We expect to gain clarity on potentially streamlining and accelerating the AeroAAT development program. We expect to initiate multiple Phase 2B studies for AeroHSD, AeroApoC3, and AeroAng3, and possibly for AeroENAC and AeroHIF2. We also expect to initiate a Phase 3 study for AeroApoC3 and FCS patients. We expect to file at least three new CTAs this year, including our first for a candidate targeting skeletal muscle. and by the end of the year, I expect Arrowhead to have at least 11 clinical programs targeting four different cell types and eight of those clinical programs could be wholly owned. This is indeed a substantial amount of potential value creation. We feel great about where Arrowhead is today and we're confident about what we can accomplish going forward. It seems like all the pieces are in place for scalable and sustainable growth. We have a strong balance sheet and are disciplined in our use of cash and many more.

27:00 and we believe treatment is on the verge of potentially showing that RNAi can be a powerful therapeutic mechanism for diseases throughout the body. We have a large and rapidly growing pipeline of differentiated product candidates addressing diseases without adequate treatment options. These are all innovative first-in-class molecules, not fast-follow, incremental or meet-you products. And lastly, we have the right team in place and an unwavering culture of challenging the norms of drug development. Arrowhead always finds a way to be better, faster, and more efficient than others in the field. This is a powerful combination, and it gives us the opportunity to make a difference in the way numerous diseases are treated. Thanks again for joining us today. I would now like to open the call to your questions. Operator? Certainly. Ladies and gentlemen, if you have a question at this time, please press star then 1 on your touchtone telephone. If your question has been answered and you'd like to remove yourself from the queue, please press the pound key.

27:55 Our first question comes in the line. That's Alvin Richter from Goldman Sachs. Your question, please.

28:00 Good afternoon. Thanks for taking my questions. So just one on the ENAC program. Could you help us understand kind of the threshold knockdown that you want to see here and, you know, what you saw preclinically that could translate? And then on the HIF-2 program, you know, what gives you confidence or optimism with regard to the translation in man? Thank you.

28:25 Thanks very much. So let me start with ENAC. That's a tricky question. There's good experimental evidence. There's good genetic evidence. on the possibility of knocking down ENAC and helping that mucociliary clearance in these types of patients. But the fact of the matter is no one's been able to create a therapeutic that can do that safely, and so we are true pioneers here. So it's hard to say what sort of knockdown could be helpful. The best idea we've got, I suppose, is if you look at the genetic analysis, Hederazygotes, essentially Hederazygotes ENAC knockouts in humans do see a clinical benefit, we think. And so it feels like if we can reach 50 or so percent knockdown, we could see something helpful.

29:18 There's an awful lot of green between where we are and the pocket, as they say, in billiards. And so we still have a lot to learn. But that sort of feels like the bogey to us right now is 50 percent knockdown could be helpful. With respect to HIP-2-alpha, you know, that's also a hard one. We have done as much as we have could, as we've been able to do, in animal models. But as you know... Translation is always a trick with oncology. So we're just waiting to see. We're looking forward to seeing the data over the next couple of months, and we'll see where we are. The annual data have been good. We feel confident that we'll see knockdown. We don't have a good idea about how much knockdown you really need to see to see a clinical benefit. But similar here, I think we would call a win 50% or so knockdown. That's a bit arbitrary, but that feels reasonable to us.

30:10 And so we'll see how we stack up against that over the next few months.

30:15 Thank you.

30:16 Sure. Thank you. Our next question comes from the line. Ray Craft from Jefferies. Your question, please.

30:25 Hi, everyone. Thanks for taking my questions. So I just wanted to do a quick check on timing for the three Phase I readouts. It sounds like you can't predict the order of the readouts, but, Chris, I think you mentioned by end of 2Q in your prepared remarks. So just checking if the guidance is for end of 2Q or is it softer in 2Q? A possible update could come in 3Q.

30:48 No, we're shooting for the end of the second quarter. You know, these are ongoing studies, and so nothing's going to be finished by then. And so, you know, we'll see what we have in hand, and we'll see if we can make an interpretable data. That's going to really be the kicker for us. I think that we can hit that by the end of the second quarter. That's our goal.

31:11 Got it. Okay, so you'll report the data by the end of the second quarter then? That's the goal.

31:16 Yes. Again, it's going to be a subset of data. It'll be just top line. As James mentioned in the prepared marks, our goal here is to show a fuller data set at appropriate medical meetings. Our goal here is to give you a taste to show you whether or not it appears the drugs are working, and then we'll disclose more going forward.

31:41 Got it. Okay. And then for the ENAC data, can you clarify how many subjects you plan on reporting there? And with the additional 12 subjects that you're planning on enrolling, do you have an idea of what the doses and dose range will be?

32:01 So let me, let's see if we can unpack that. I can't tell you how many patients we're going to be reporting on because I just don't know. As I said, we're I think we'll be talking about this sort of midstream, but my hope is that we'll have some data from the first and maybe the second dose cohort in the patient population. With respect to the healthy volunteers and the bronchial brushing and lavage, James, you want to address what those doses are?

32:44 and the Healthy Volunteer cohorts, it's likely that we'll, since the safety profile has been favorable, we'll go with the highest dose cohort to give us the best chance of showing knockdown either in bronchial brushings or BAL.

33:05 Okay. Okay, fair enough. And last quick question just for the HIF-2 patients. Can you say how many biopsies you have already and maybe give a sense of what baseline HIF-2 expression levels look like?

33:19 So we haven't seen the data yet. You know, these are going to be batched, and so we haven't seen any data yet, although, James, you want to talk about how many biopsies we've had so far? Yeah, sure.

33:29 So we've completed pre- and post-dose biopsies in all six of the cohort one patients, and then pre-dose in five of the core two patients. And now we won't know about viability of those until we start staining the slides. So how many of those will be able to analyze? We don't know that yet, but that's how many biopsies have been completed.

34:02 Got it. Okay. Thank you very much for taking my questions.

34:05 You're welcome. Thank you. Our next question comes from Sean Egan from Citi. Your question, please.

34:12 Hey, guys. Thank you for the comprehensive update. Are you able to provide any more details on the safety update you provided today? Just how many patients? Is it just healthy volunteers? Are there actually CF patients in there as well? And then I have one follow-up on the skeletal muscle program.

34:31 Sorry, you broke up there a little bit. So you're asking how many patients... have been treated so far with ENAC between healthy volunteers and patients. Was that a question?

34:42 Just the safety update you gave today that everything looks good so far. How many patients does that include?

34:49 Sure. That includes all the healthy volunteers and the first four patients in the study. That's a whole word. Sure. And you want to go into how many healthy volunteers that is? Yeah, sure. So that's a total of 24 healthy volunteers. Okay. Six for cohort, and then we'll add that additional 12 for the BAL studies.

35:12 Great, great. Thank you. And then for the skeletal muscle, it seems like it's an area of, you know, active area for RNAi and antisense oligo. Are the gating steps for that program, is it compound optimization at this point, or is it more about being strategic for the indication that you're going after?

35:30 You know, for this first one, We're just on the conveyor belt now. Once you have a nomination and such, there's just sort of a time it takes to get through GLP talks and the like, and we're just in that right now. And so we feel comfortable that we've got a drug candidate. We just need to complete the IND enabling steps, and we are in that process right now. We feel comfortable that we're on track to file that CTA sometime in the summer.

36:02 Okay. Thank you so much. Appreciate it.

36:04 You're welcome. Thank you. Our next question comes from the line of Luca Isi from RBC Capital. Your question, please.

36:14 Oh, terrific. Thanks so much for taking the question, and congrats on the progress. Maybe one on A118. I think you mentioned optionality to streamline the Sequoia trial and the upcoming FDA meeting. Can you just give us a sense of what's on the agenda for that meeting, and what are some of the key goals that you're hoping to achieve during that meeting? So that's one. And then the second on HIF-2-alpha, maybe a bigger picture, can you explain a little bit more on what's the bogey for success here? I understand that this is a trial primarily, dose escalation, and you're looking at PKs, but what are some of the key biomarkers that you're really focused on to know whether this is a molecule that is worth further pursuing? Thank you.

36:53 Sure. So first with AAT, you know, I can't go into that too much because we really haven't, Thank you for joining us. planning on treating patients for at least two years. That does not appear to be required at this point, and so we'll shorten the study. But then we also want to see if we can agree on some maybe more appropriate endpoints. So let us have those discussions, and then we'll get back to you on what the FDA has advised.

37:50 With regard to HIF-2-alpha, I tell you, since this is our first solid tumor targeting program, We're really just focused. Our primary focus here is just two things. Safety and tolerability, of course. And so far, that's been acceptable. And second, knockdown. And as I mentioned there, we just haven't seen data yet. Those biopsies are going to be batched, and we'll have an idea over the next several months what kind of knockdown we'll get. But we'll really focus on knockdown. Thank you for watching. You know, HIP2-alpha, as you know, is a well-validated target.

38:47 There's another drug right now in development that looks quite good. And so we think that as long as we can show reasonable knockdown, there's a place for us with this drug. And then again, you know, we see a lot of upside here. If we can knock down HIF-2-alpha in solid tumors, we can knock down, we think, a whole host of other cancer targets. And so fill in the blank. There's a number of targets that we're going to want to go after, maybe ourselves, maybe in partnership with others, against various tumors. So we're in a really interesting, really exciting spot right now where we're just waiting for data. And if those data look positive, then I think we're off to the races. Very helpful. Thank you. Welcome.

39:33 Thank you. Our next question comes from the line of Esther Regafino from UBS. Your question, please.

39:39 Hey, thanks, Chris and team. I have a couple on APOC-3 and then one on AAP. So in the past, you've talked about initiating a phase 3 registrational trial in FCS, and your comments today seem to suggest that that's a potential. Am I reading too much into it, or are you still sort of going strong with the FCS? And then with regards to the Phase II trials, the two Phase II trials that you're going to start in patients with, I believe what you said in the past, with severe hypertriglyceridomiax and those with levels greater than 150. But I noticed that the trial in the severe Phase II patients, you're excluding patients who have recent pancreatitis. So why is that? That's two questions in there.

40:28 Sure. So with respect to FCS, yes, you are reading too much into that. We are going full speed ahead on a pivotal study in those patients. Our timing of this is we plan to file Thank you very much. The two phase 2B studies, as you know, are going to be in patients with severe hypertriglyceridemia, so those patients above 500.

41:23 We view that as kind of our fat market. We think it's a grossly underserved market, and there are The regulatory pathway there we think is reasonably clear, and we think it's a pretty large population. So it's one that we're really focused on. Now, we also want to look at, in a Phase IIb study, those patients who have elevated triglycerides. So say between 150 and 499, we think that that is also an unmet medical need. That, we think, would require a more comprehensive Phase 3 study, probably an outcome study. I don't know that we're going to do that, but we want to retain the optionality, and so we want to do that Phase 2B study right now just in case in the future we're going to want to expand into that patient population.

42:16 So with that, anyway, I'll hand it over to James.

42:19 Sure. The question was about excluding patients with pancreatitis in the ApoC3. Is that right?

42:26 Yeah, that's right.

42:28 So we actually don't exclude patients with pancreatitis in either of those Phase IIb studies and either the severe hypertriglyceridemic or the kind of middle-of-the-road, greater than 150 high triglycerides study. We do have an exclusion for any patients with active pancreatitis within the last 12 weeks, so we just don't want anyone in the study who has recently had for pancreatitis and may still be suffering from associated sequelae. So we actually have some endpoints in the severe hypertriglyceridemic study looking at, you know, rates of pancreatitis and things like that. So we don't exclude those patients.

43:15 Got it. So it's only if they've had it within the last 12 weeks or so that you're not going to include them.

43:21 prior to their first dose, excluding patients who have very recently had pancreatitis.

43:30 Got it. Okay. And then on AAP, you have a few readouts in 2021, and can you frame for us some of the scenarios for that 12-month readout and what the readthroughs could be for the Phase 3 trial? It sounds like in your response to a prior question, You seem to have more confidence, Chris, that you may not need that two-point reduction in fibrosis score for registration. So how are you thinking about it? I mean, are you going for that polymer reduction rate and maybe tying that to other studies that have shown a link between polymer reduction and fibrosis?

44:09 Yeah, again, I don't want to speak too much on this because I don't want to get out ahead of our discussions with the FDA. But in a nutshell, yes, I think that I think that it's clear that the accumulation of this Z protein is what causes alpha-1 liver disease. I think it's clear as day. And so we think that we can make an argument that that could be an approval endpoint or at least part of a composite endpoint that we shouldn't have to show a reduction in fibrosis. I mean, if that's not an approval endpoint for NASH, we don't think that should be an approval endpoint for this kind of rare disease. So it will be, and frankly, the Sequoia study wasn't dependent upon resolution of fibrosis either. It was improvement in a histologic gradient scale without worsening of fibrosis.

45:02 Our hope is that we can move that a bit as well because, again, we think that the biology is increasingly clear on these folks and that simply reducing Z burden could be a good marker.

45:19 Okay, thank you.

45:21 You're welcome. Thank you. Our next question comes from the line of Ted Tenthoff from Piper Sandler. Your question, please.

45:29 Great. Thanks, guys. Thanks for the update.

45:31 Kind of changing tack a little bit. I mean, so much going on here. You guys have had a lot of success with partnering assets, both hepatitis B and obviously AAT. As we kind of look forward, What is Arrowhead going to be when you grow up? Like are you going to be a targeted cardiovascular company, you know, with so much going on in oncology with respect to combos? Is that something that might be a partnerable asset? Liver disease similarly? Give us kind of a broader sense for how you're looking at these different assets and what you think is going to be core in the future of things.

46:16 Thanks, Ted. That's a great question, and it's a dynamic question because what we are capable of focusing on will, of course, change as we grow and such.

46:27 Here's what we see broadly.

46:29 As you know, Ted, you've followed us for quite some time. Even when we were a $40 million company, we never saw ourselves in the future as a as a company that focused only on a specific therapeutic area. We just thought this technology was too powerful, and we thought there was too much value to create to focus that narrowly. And so we've done an awful lot of work over the last decade, and again, you've seen most of that, looking to push this technology into other cell types, and we're now just on the cusp of that. So then it gets to the question, okay, with this embarrassment of riches that we've talked about a lot, what do we keep in-house, and what do we... What do we look for partners on? I am quite certain that we will build out sales infrastructure and marketing infrastructure in other areas as well.

47:40 Will that be oncology? It could be. In the near term, though, oncology is hard. My hope is that we see some good positive data in Arrow HIF-2 that would enable us to bring in a good partner to start to really blow out that franchise. It doesn't mean that we won't have our own wholly owned offerings. But at some point, we'd be certainly open to working with a broad-based oncology company with deep expertise to help us prioritize targets and such. We're not there yet. We want to generate some data first. But at some point, that probably makes some sense for us.

48:21 Yep, perfect. Makes a lot of sense.

48:25 Yep, thanks. Thanks, Ted. Our next question comes from the line of Alethea Young from Cantor. Your question, please.

48:34 Hi, guys. This is Leon Felicia. Thanks for taking our call. So just wondering if the HIP2 program looks successful, what other targets might be of interest to you in oncology? And then how are you thinking about other companies with similar mesh targets? Thank you.

48:59 Sorry, so the question was other oncology targets, and then how do we fit with other NASH strategies? Is that where we're going?

49:12 Yeah.

49:13 Okay. Yeah, I don't have much to tell you on the oncology targets. We are working with some other targets. We haven't disclosed anything there, but we do have some internal programs. As I mentioned just a second ago, we would like to bring in a partner at some point. I don't know when the right time is. I don't know if it's this year or next year or some other time. But to the extent that we have positive data, we would like to do this, to do at least part of oncology with a partner. And so I don't have much to offer on other targets we're thinking about right now. With respect to NASH, boy, NASH is hard. We like the genetic data for HSD.

50:02 It is compelling that if you can knock down HSD, it does seem to have a bit of a protective effect against NASH. It doesn't mean that that should be a silver bullet. In fact, I would expect that NASH is going to be more like HPV in that it's going to be a combination approach. I have no idea what the right combination is, and frankly, it's probably a different combination for different patient populations. I think we're learning that it's probably a number of different diseases. We think that HSD could be a really nice backbone and could help a variety of these patient populations and then you can layer on top of AeroHSD some other compounds. It's too early for us to tell right now because again we haven't even seen any data yet but that's sort of how we see it.

50:47 We've also said in the past that we like The idea of HSD for alcoholic hepatitis as well, the genetic data there were at least as exciting as they were for NASH. And so while we're not doing anything right now in those patient populations, I could foresee us getting into that at some point in the future. So sorry, that's sort of a non-answer answer, but that's how we're thinking about NASH right now.

51:17 Okay, that's helpful. Thank you.

51:19 You're welcome. Thank you. Our next question comes from the line of Patrick Truccio from H.C. Wainwright. Your question, please.

51:28 Thanks. Good afternoon. I have a follow-up on the cardiometabolic programs. So I'm wondering what questions you're looking to answer in the smaller open-label studies with AeroApoC3 and AeroAng3. Secondly, how many studies would you anticipate and how many patients would you anticipate enrolling in these studies, and when would the data from these studies be expected?

51:50 Yeah, thanks. I'm glad you picked that up. I think it's an important point. We've talked in the past about the two Phase IIb studies for ApoC3 and the one Phase IIb study for ARN3, and of course the Phase 3 in AOC3 for FCS patients. We've talked about those a lot. We are now just starting to explore some other questions for these smaller studies. We haven't set on those yet. I assume that by our next conference call, we'll have set those and probably set those in motion a bit so I can talk about that more then. But at this point, we are exploring what those mean. There's going to be a handful of these things. Our goal here was twofold. One is to answer as many questions as we can during this time frame because, look, these Phase IIb studies are going to be blinded and they're going to be not long, but say a year of exposure.

52:39 And so there's going to be a time that we just – A time frame that we can't move into a pivotal study until those are finished. And so we might as well take advantage of that time to answer some other questions. We're looking to do that. I think these are going to be shorter studies. Many of them or some of them can be open label. And so it gives us a chance to report on some of these studies while the longer ones are still in process. And so it allows us to continue to talk about these and tell you about what we're seeing. But I really can't give you specifics yet because we're still sort of in the trenches on that. I expect that we'll have those set over the next couple of months or so.

53:22 Got it. And then just a few on the lung programs, follow-ups. First on AeroENAC, what drove the decision for the protocol changes? Is that something FDA asked for or what specifically is the driver of those changes? And then on AeroCoV, a competing RNAi program had been delayed because of the need to conduct more work in a hamster model. So I'm wondering how things are progressing for AeroCoV and if this program could begin human trials in 2021. And then secondly, to what extent are the new emerging variants impacting this program? Should we expect more RNAI triggers to avoid resistance? And how do you view RNAI antiviral positioning as compared to the monoclonal antibodies, several of which have the EUA authorizations, emergency use authorizations in the U.S., but they appear to have some resistance issues with these new variants?

54:10 Okay, there's a lot of questions there. So let's start with ENAC. The changes in the protocol were driven entirely by our desire to see, to look at knock down health volunteers. It wasn't required by anybody. It wasn't included in the first protocol because, frankly, we didn't have an assay yet. We weren't really sure we could measure it. Since then, we have developed this assay, and we're ready to go. And so now we want to look at bronchial brushing and bronchial lavage in order to see knockout in healthy volunteers. That's going to be a really important measure for us because, as I mentioned in the prepared remarks, this is a small study in patients. and so it is likely that it's going to be difficult to see FEV1 changes in four patients in a given cohort just because it's too small. And so this gives us a better measure on how well this drug is working and how well it's delivering to pulmonary epithelial cells. So that was the rationale for changing the protocol and including those folks. Now with respect to COVID, COVID, we've not been able to move as fast as we wanted to on COVID in large part because the animal models are just, we don't control the animal models and it's been hard to get slots to do these animal studies.

55:38 So we have not been as fast as we have been in other areas where we can do our own studies or we've got a larger variety of CROs that we can work with. So it's lagging because of that. We're still excited about it, of course. You mentioned the new variants that people are talking about. That has not affected our program, but it has just reinforced our... Our belief that there is a real role here for RNAi-mediated antivirals. It is certainly possible that at some point this virus is going to mutate around the vaccines.

56:24 And so our goal here was to make a broad-based antiviral that not only could work Thank you very much. Thank you very much. Thank you. Our next question comes in line of Mike Minton from B.

57:24 Reilly Securities. Your question, please.

57:28 Hi. Congrats on a productive 2020, and it seems like even a busier 2021 ahead for you. Thanks for taking my question. So a quick follow-up on EMAC. Is there anything you've learned from a PD standpoint or anything from an alternative approach, antisense, That gives you confidence at this point on target engagement. Anything you can comment on that?

57:53 Yeah, that's a good question. It's hard for us to interpret the antisense data that we've seen. So there's been no bad news there for us, but there's been no good news either, the way we look at it. So no, unfortunately. We'll have to wait to see what those data look like, and we're, of course, anxious to see what our data look like. We're going to know a heck of a lot more over the next couple of months, that's for sure.

58:22 Okay. And then just a quick follow-up on the biopsy duration for the HSD program. And anything, if at all, we learned from the surprise six-month biopsy we got from the AAT program, is there any read-through to that? Again, I understand, you know, it's different proteins we are talking about, different types of knockdown, complicated diseases. Any read-through you guys think internally about, you know, as you think about the NASH program?

58:53 I don't know that there's read-through. You know, what we've learned in all these programs is that all these proteins are different. And so, you know, the and all the triggers are different. Depending on the trigger and the protein, knockdown depth and duration are going to be different and so we are confident that we will see good, deep and durable knockdown in aero HSD because of our experience with HBB and AAT and ApoC3 and ANS3 and LP little a and others but I don't know that we learned anything in particular with AAT that we can apply to HSD. We are I think success here is pretty narrow.

1:00:03 and see how deep and durable the knockdown is. And then we'll take that into a larger Phase IIb study that may give us some idea about disease progression. But we don't expect to learn anything about that at this point.

1:00:16 And to clarify, six-month duration biopsy, right? Or 12 months?

1:00:22 So we do two different post-dose biopsy time points. One is at day 71 post-dose and the other is at After the last dose, these patients get two doses, and the other is at day 169. So we staggered them to get a better idea of duration. Okay, great.

1:00:41 And my final question, as you think about cash flows, and you obviously have some partners coming in, you know, J&J, Amazon, Takeda, how should we think about your, you know, burn rate for 2021? You know, also keeping in context some of the, you know, the near-term, I think we might have lost you. You're very quiet, Mike.

1:01:05 Can you hear me now? Can you hear me now? Yeah, you're back. Yeah, so final question was on cash flows. Thank you. 2021 and think about the different partner milestones from J&J, Amgen, and Takeda. How should we think about your burn rate? Again, in context of some of the, you know, the commercial stage programs might be getting pushed out a little bit, like APOC3 and AAT obviously being partnered out. How should we think about the expense for 2021?

1:01:36 Well, so we reiterated today that we expect, you know, to burn between $200 and $250 million in fiscal 2021. We've got plenty of cash to afford that and I do Thank you. Thank you. We can have access to additional milestone payments. And so, look, I feel good about our balance sheet right now.

1:02:22 I feel good about our access to additional capital between, you know, all three partnerships.

1:02:31 Excellent. Thanks for taking my question. You're welcome. Thank you. Our next question comes from the line of Keith Mankey from Charting. Your question, please.

1:02:43 Oh, yeah, thanks, Chris, with respect to HIFs. If your working thesis right now is that 50% knockdown could have an effect on the disease, should that prove to be too low based on your current dose levels and dose intervals, do you believe you could go higher than that to achieve a higher knockdown if needed?

1:03:10 Yeah, we'll see. You know, it'll be really helpful to... to see what the dose response looks like. If, in fact, we see 50% knockdown at the highest dose we're giving, at least what we've seen so far, we see no signs that we can't escalate more. It's not a traditional cancer trial, right, where we dose as high as we can until we get people sick and then we knock the dose down. We don't respect those living toxicities. And so to your point, Sure, it is certainly possible that we get a 50% knockdown and we still think there's more knockdown to be had as long as we're not seeing DLTs, we're happy to escalate. And like I said, neither in HIF-2-alpha nor in ENAC so far have we seen evidence that we've got a safety issue.

1:04:05 Great, thank you.

1:04:06 You're welcome. Thank you. Our next question comes from the line of Manny Faruhar from SVB LRINC. Your question, please.

1:04:16 Thanks for taking the question, guys. I want to quickly follow up on something that I think it was Morrie actually touched base on this. Around the ENAC readout, you mentioned in your prepared comments that it's reasonably possible to see an uninterpretable or unclear FEV benefit while seeing a very substantial knockdown benefit in the Healthy Normal Volunteers. should you see that data set, which is one that's a profile that we'll see in the early data sets from Vertex, Transway Bio, et cetera, many others. How do you interpret that as either A, the target isn't effective, or B, you need to dose higher? How do you choose to move forward from a data set that doesn't necessarily give you a relationship between knockdown and dose and efficacy?

1:05:03 Yeah, so look, There's a lot of... It's hard to play that game until we see the data. But I guess the broad answer would be, look, if we saw good knockdown, but in those four patients we can't discern FEV1 changes, I don't think that we're so worried at this point. We say to ourselves... Thank you very much. It's a pretty short study as well. We'd be happy to assume we're getting good knockdown. Maybe we just need a bit more in the way of dosing to start to see those manifest in FEV1 changes.

1:06:10 So all is not lost, you know, if we cannot register an FEV1 change but we see good knockdown. To the contrary, I think that suggests that we have something that's really powerful. And we've got plenty of time this year to treat some more patients as well as treat them a bit longer or at least monitor them longer to see if we can see some FEV1 changes. Great. That's really how we're going to change it. Thank you.

1:06:36 Thanks. The cohorts we'll have in the middle of the year will be the two lower dose cohorts. So we still have the top dose in CF patients to go. And also there will be the baseline characteristics of the patients. When you're talking about small ends like this, that may make a difference. It shouldn't matter theoretically what the genotype is or Background Therapy. But this is a small N. So I think the main point here is that we get knocked down, we get functional delivery, and we're safe. And then that's a win. Right.

1:07:07 That's what we want people to focus on. Let's look at that if you want, of course, because that ultimately is going to be important. But when we're looking at this drug over the next couple of quarters, what we're really focused on are the knockdown data and, of course, the safety and tolerability of the drug. If both those are positive, we are off to the races, and we'll continue to look at patients going forward.

1:07:33 That's really helpful. And then hopping over to NASH, there have been a couple of other companies that have also commented on genetic data. Obviously, there's some evidence. It's unclear if it's correlative or causative in terms of the potential benefit in both alcoholic and non-alcoholic steatohepatitis. What kind of data sets would you need to see, maybe in later stage studies from you guys, to parse that out and say, okay, this is really causative and, you know, a knockdown of HSD is going to be reasonably expected to show benefits. and a long-term pivotal trial. Are there biomarkers you're tracking? Are there early clinical data sets that we might see as early as 2022 to sort of parse out that causation correlation issue?

1:08:20 Yeah, sure. I'll take that one. I mean, the easy one for this target is ALT and that's been correlative to the loss of function mutation that those individuals tend to have lower ALTs. So that's an easy biomarker for us to read out in early stage studies and beyond. Beyond that, there's not a whole lot else from a biomarker standpoint in terms of imaging or other blood tests. I think then you're looking at Phase IIb biopsy studies to show proof of pharmacologic effect and benefits.

1:09:07 Great. That's really helpful. Thank you. Thanks for taking my questions.

1:09:11 You're welcome. Thank you. This does conclude the question and answer session of today's program. I'd like to hand the program back to Chris Anzalone for any further remarks.

1:09:22 Thanks everyone for joining us today. It's been a pleasure to speak with you and we'll talk to you next quarter. Thank you ladies and gentlemen for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.